Software R&D Tax Credit claims – are you watertight?

Of the R&D Tax Credit claims made to date in 2017-18, over 12,000 were made by companies within the ICT sector.

Historically, HMRC have sometimes had difficulty in assessing the validity of software claims as qualifying R&D. This is because their caseworkers are not software professionals and it can be difficult for them to appreciate whether a claimed advance genuinely goes beyond current knowledge or capability in a particular field of software development. That can be particularly hard where the software in question is specific to the claimant company.

However, this situation has begun to change as HMRC caseworkers can now refer questions of difficulty to HMRC’s own IT professionals for guidance either to the current technology state of play, or to appropriate questions to ask, to flesh out the R&D aspects of the development.

In addition, HMRC have published clarification on the characteristics of software development that falls within the published R&D definition at CIRD 81960.

The level of HMRC scrutiny of software claims is likely to increase and be better focused in future. It is therefore imperative that claims are prepared by experts.

Software projects likely to qualify include:

  • Developing new operating systems or languages
  • Creating new search engines using materially new search methods
  • Resolving conflicts within hardware or software, where the existence of a problem area and the absence of a known solution have been documented
  • Creating new encryption or security techniques that do not follow established methodologies
  • Creating new or more efficient algorithms whose improvement depend on previously untried techniques
  • Improving systems to perform significantly beyond industry standard benchmarks

Software projects that will not be treated as involving qualifying R&D include:

  • The handling of interactions with others. This covers areas such as development of data entry procedures and user interfaces
  • The visual presentation of information to users
  • Creating software that replicates an established paper procedure, possibly building in best practice. The fact that a previously manual task has been automated does not by itself make it R&D
  • The assembling, carrying out routine operations on, and the presenting of data
  • Using standard methods of encryption, security verification and data integrity testing
  • Creation of websites or software using tools designed for that purpose

MSC R&D uses experienced IT professionals to prepare R&D Tax Credit claims for our clients – many of whom were previously making claims prior to working with us where we were able to deliver additional value.

We have also been engaged on a number of occasions to assist with HMRC enquiries as our expertise extends to including the ‘guy who wrote the rule book’ within our team.

Our claims process is fast, time efficient and in-depth, and our support is comprehensive.

So, although you may feel that your current claims process is satisfactory – are you sure your claims are optimised and compliant – might there be a better way?

No need to worry though or lose any sleep wondering about whether you might be missing out – just contact MSC R&D for a no-obligation review of your current solution.

Call us now on 0114 230 8401 or email: businessdevelopment@mscbdg.co.uk